The Biden administration, USDA, and lawmakers on both sides of the aisle have found something to agree on when it comes to typically divisive meatpacking industry issues. They say the next farm bill needs to do more to help smaller, local meat processors get up and running.
USDA announced $1 billion worth of grants in 2023 for meat processors, and the farm bill advanced by the House Agriculture Committee May 24 includes additional bipartisan provisions aimed at spurring the development of smaller-scale processing capacity.
The farm bill provisions “will help make for a better marketplace, and we see that in prices – they are much stronger than they were a few years ago,” said Rep. Dusty Johnson, a South Dakota Republican who co-sponsored several proposals included in the $1.5 trillion farm bill.
Some advocates for small meatpackers and processors say the grant program and the farm bill proposals are helpful but don’t get to the core of the issue – that the vast majority of the protein sector is controlled by a few companies.
“We all know that a billion dollars in grants without some fundamental change in the marketplace is a drop in the bucket,” says Greg Gunthorp, an Indiana farmer whose family has operated a small processing facility for more than 20 years. “In some ways the USDA should be applauded for the effort … but collectively all of the programs were in a way throwing spaghetti against the wall and hoping it sticks.”
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Only four companies – Tyson Foods, JBS, Smithfield and Marfrig – control most of the U.S. meat processing market. About a dozen federally inspected plants produced just under half of the country’s beef in 2022 and 14 plants produce about 60% of the nation’s pork, according to a report by Investigate Midwest using USDA data.
Provisions Johnson got into the bill include the A-PLUS Act to increase investment in small meatpackers, and the Butcher Block Act to assist new and expanding livestock or meat processors. In addition to Johnson, sponsors of the A-PLUS Act include Reps. Mark Alford, R-Mo., and Jimmy Panetta, D-Calif. Rep. Abigail Spanberger, D-Va., co-sponsored the Butcher Block Act.
The bills essentially codify efforts that USDA has undertaken in various forms in recent years.
The A-PLUS Act would revise the Packers and Stockyards Act to clarify that livestock auction owners may have an investment interest in small meatpackers. It would allow auction owners to invest in packers with a capacity of less than 2,000 head of cattle or 10,000 hogs per day.
The fear of vertical integration and control over the market by huge companies is the main reason that, historically, livestock auction house owners weren’t allowed to have a financial interest in a meatpacking and processing operation. Despite that, concentration has continued.
Rep. Dusty Johnson, R-S.D. Allowing investment by auction operators in relatively small processing operations would encourage development of new, more localized processing, he said.
“I believe the market will be better off with more capacity outside the Big Four,” Johnson said. “If you have the opportunity to bring more investment into the processing space … some of those stories are going to be pretty successful.”
The Butcher Block Act would help new and expanding livestock or meat processors improve marketing and would allow financing of cooperative stock in producer-owned facilities. And similar to the existing Local Meat Capacity program, the legislation would allow a grant program to help with new construction or expansion of existing smaller facilities.
The Senate Agriculture Committee has yet to take up a bill, but Chairwoman Debbie Stabenow, D-Mich., last month released a detailed summary of a draft bill, the Rural Prosperity and Food Security Act, that would provide more grants and resources for small- to medium-sized meat and poultry processors – mostly through equipment upgrades and worker training.
Stabenow also is proposing a new “flexible financial product” for food supply chains by expanding USDA’s Food Supply Chain Guaranteed Loan Program to offer complementary grants. That program would help finance real estate and infrastructure upgrades.
Stabenow also is proposing to establish the Office of the Special Investigator for Competition Matters to enforce the Packers and Stockyards Act to prevent anticompetitive practices.
The USDA grants, begun last year, include most recently $9.5 million to 42 projects through the Local Meat Capacity (Local MCap) Program. These awards are for equipment purchases. The program is administered by the Agricultural Marketing Service with funding from the American Rescue Plan. Overall, the latest announcements involve awards of $10,000 to $250,000 to buy processing equipment such as meat grinders, stuffers and smokers.
- $178,983 to Plymouth Meats LLC in Terryville, Connecticut. This woman-owned company is the only USDA-inspected facility in Connecticut to harvest, process, and smoke beef, hogs, lamb and goats. It serves farmers in Connecticut, New York, Massachusetts and Rhode Island. The company will use the money to buy a new smoker, slicer and vacuum sealer to increase processing capacity by 10%.
- $250,000 to Oxford Packing LLC in Downey, Idaho, to buy a freezer that allows it to triple storage capacity and a new smoker for bacon, ham, jerky, hot dogs and other products.
- $241,172 to Elma Locker and Grocery Inc., Elma, Iowa, for the purchase of equipment for the smokehouse, processing floor, packaging and mixer-grinder operations. The upgrades will increase capacity from 18 to 24 beef cattle and from 20 to 30 hogs per week.
Gunthorp’s Indiana operation processes pigs and turkeys at a USDA-inspected facility. It used to slaughter up to 120,000 chickens per year but the Covid pandemic “put the final nail in the coffin” for chickens, he said, as profit margins disappeared.
Overall, Gunthorp is disappointed there isn’t more in the House committee farm bill. “I honestly thought with Covid and all the problems we’d seen with empty shelves and lack of resiliency in the market that Congress would go in a different direction,” he says. He believes there was an opening for preferential treatment for small- and mid-sized processors, but instead “they doubled down on more of the same.”
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